"We Are Optimistic with Regard to 2016"

An interview with IAI's VP Marketing about evolving markets, growth engines and significant organizational changes

Inside one of IAI's plants (Photo: Meir Azulay)

"2015 was not an easy year for the Israeli defense industries," says, very sincerely, Sharly Ben-Chetrit, VP Marketing of IAI.

"On the one hand, Israeli defense exports have been decreasing every year in the last few years, so that across the range you see a significant decrease. IAI has a civilian commercial 'foot', where it has not yet emerged from the crisis that started a few years ago.

"Consequently, it was an uneasy year, but at the same time, when I look at the total performance, all in all we have grown by dozens of percent in the number of transactions over the last few years, as reflected by the hundreds of transactions we had in the last three years, compared to the usual amount of transactions we used to have prior to that.

"Admittedly, we have not had giant deals like those we had in the past (for example, the deals involving the sales of reconnaissance aircraft or the giant deal involving the sale of shore-to-ship missiles – A. R.), but I am currently leading a change regarding the future deployment of the Company for years without such mega-deals. You must arrange for as many transactions as possible of tens of millions each so as to minimize the risk of and vulnerability to mega-projects. This year, our inability to close mega-projects led to a situation where our total associations (in terms of the financial scope) failed to meet the maximum.

"The emphasis we had placed on small and medium transactions led to a situation where we broke the all-time record of the number of transactions implemented by the Company, in terms of the number of transactions."

Ben-Chetrit benefits from a perspective spanning many years when he addresses the primary processes taking place in the global defense export market, as he has served in various positions with IAI since he graduated from the Technion as an electrical engineer back in the 1990s.

Ben-Chetrit's first few positions involved the development of electronic warfare systems at IAI's Elta division. He then transferred to IAI's marketing apparatus, where he led massive sales transactions to a primary market in south-east Asia before he was appointed as VP Marketing and Sales of IAI (it is a normal practice for Israeli defense industries to handle the markets of India and another major client in south-east Asia separately, outside the normal marketing apparatus of the company).

During your tenure as VP marketing, IMOD operated without a multi-year plan, defense budgets were cut and plans were cancelled – how does IAI cope with the damage sustained by this state of affairs?

"Indeed, IMOD – which challenges us more and more at the technological and operational levels – did challenge us with regard to the fairly complicated budget profile. But, eventually, IDF have operational needs that arise regardless of the cuts in the defense budgets. Additionally, technological innovation combined with operational advantages are building blocks that IDF share with IAI – IDF as the client and IAI as the supplier. In view of the fact that IMOD is a role model for many armed forces around the world, I expect that the increase in domestic transactions will have positive implications with regard to the Company's overseas sales performance as well."

Over the course of the last three years IAI has experienced a decrease in the number of business associations in Asia, mainly in India. How do you, as IAI VP marketing, cope with this stagnation in associations?

"Times like these, when a primary market slows down its rate of associating with Israeli companies, are, indeed, challenging times. IAI has experienced over the course of the last three years a decrease in associations in the Indian market and I, as the Company's VP marketing, have a commitment to come up with alternatives. As part of our activities, I endeavor to establish a marketing infrastructure that would improve the Company's competitiveness.

"A business intelligence center has been established recently within IAI which, even at this early stage of its operations, has already improved the Company's situational awareness. The results of these moves are already apparent on the ground. Over the course of the last two years, IAI managed to penetrate 4 new countries where marketing infrastructure had been established that led, in addition to specific transactions, to the potential for additional transactions in those countries, and the effort is still on-going. The markets are reviewed regularly and penetration goals have been set for other countries.

"Frankly speaking, the marketing apparatus I am leading has fulfilled all of its business goals and even more. We set goals for all of our marketing agents – a culture of striving to close deals, aspiring for excellence. We have replaced quite a few marketing agents, we have refreshed our personnel. At my own staff, I replaced close to 50% of the personnel. IAI is a big ship and getting these things to move takes time. I have structured plans for changes that could catapult IAI to new heights with regard to its future associations. We are cooperating with the CEO. I believe that eventually, things will start moving. IAI should adapt itself to the changing environment. We can accomplish a lot more."

What about the marketing communication activity you established at IAI?

"In my view, a company's brand is one of the most significant assets the company possesses. Maintaining and promoting the brand are day-to-day activities that require management focus, and I am personally involved in these activities. About two years ago we established a marketing communication administration as part of the IAI marketing organization and placed it in charge of the IAI brand. Among other things, the administration is responsible for IAI visibility in exhibitions and conferences, for the Company's uniform message vis-à-vis its clients and for other activities."

Regarding IAI's growth engines by the end of 2015, were your expectations for the last year fulfilled and what do you envision for the coming years?

"Our first primary growth engine is the air-defense activity, notably the Barak-8 project. In this context we have several massive scale projects that did not materialize in 2015, but we still expect them to materialize in 2016, both in India and outside of India. The potential of this activity is several billions. The entire air-defense activity, the Barak-8 system, is intended for air forces as well as for naval forces."

Do you expect the aerial configuration to evolve further?

"We have opportunities in the field of air defense as well as in the field of naval defense. We also have opportunities for the ground arm. This is a three-arm defense system. It intercepts missiles and aircraft – it is effective against maneuvering platforms and against missiles.

"Another growth engine is the entire UAV activity. In this case, too, we envision that next year we will have very substantial transactions in this field. We have several products under development that will come into play as of next year. The third engine is the mission aircraft activity. These are our primary growth engines. They offer quite a few opportunities and I am confident that during the next year they will materialize."

IAI invested quite a lot in the ground system category. Has this investment produced any fruit?

"IAI has not been confined to the aerial domain for quite some time. We have always been the weapon system house of the IDF Navy. We are the space system house of the State of Israel. In the ground system category, even if it is not called 'ground systems' we have had many transactions. Today we are really focusing on this field and create new activities in which we had not been involved in the past. We are entering such activities as armored vehicles, weapon system suits for armored vehicles, the entire field of robotics – we invested substantially in development and have come up with highly advanced capabilities in the field of robotics – and that is highly relevant to the ground domain. We developed capabilities and products that are already offered for sale on the market. This is only the beginning of the ground robotics activity and it can definitely emerge as a future growth engine."

Have you accomplished a technological breakthrough in this field?

"Definitely. We progressed from remotely-controlled systems to semi-autonomous systems and to fully-autonomous systems. These systems are capable of negotiating obstacles, analyzing the terrain and the combat zones and selecting routes. We incorporated artificial intelligence in autonomous systems – we definitely have such systems for sale."

Have you had any success with intelligence and Big Data systems?

"In the field of intelligence, IAI is a superpower. We have intelligence systems for all activities. For us, this is a bread-and-butter category that we sell year-round. In this field of activity we have intermediate-scale projects of tens of millions that we sell worldwide."

In the space field, does the recent breakdown of the Amos satellite impact IAI in any way?

"In the space field, we have several types of satellites. We have a few future satellite models. The Amos-5 satellite – we operate it but it was not an IAI satellite. We are dismayed at every such failure, but the satellites by IAI have thus far met all of their performance requirements and planned life cycle and beyond. We are currently working on the Amos-6 satellite that will be launched sometime during the next year. We have various projects in the space field. This activity must be fed constantly. Unless the space activity is fed with the acquisition of new satellites – this national resource could collapse."

What about the UAV market?

"This market does not offer many opportunities. We had a few opportunities in Europe – some of the countries there purchased the US-made Reaper UAV. We are currently in the final stages of a competition in Germany that we hope to win. There is no huge market for strategic UAVs. In the field of tactical UAVs we are very strong with our Heron-1 and its variants."

In the USA you established a subsidiary…

"Stark Aerospace, the company we established in the USA, was successful and delivered some large-scale transactions. In the last few years there were no high-grade transactions. Today we are redeploying for our future activity through Stark Aerospace. We initiated numerous moves which we plan to intensify. Stark Aerospace is there as an IAI presence in the US market, for manufacturing purposes and as a marketing channel. In the next year or two, we will get it back on the right track."

What about South-East Asia?

"South-East Asia is one of our primary markets. Admittedly, there are tensions there because of the China Sea. It is a potential market, we are operating there and we have already had some nice success stories in that market."

Did you mark the Vietnamese market as possessing a significant potential?

"A few years ago this market was regarded as the next great promise. We have had some transactions there. We identified several opportunities in that market and have had several success stories. The Vietnamese market is definitely a future market with a high potential. So far, this potential has not materialized as expected, but it has a potential." 

 

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